Companies Keeping Cash Overseas Don’t Like Talking About It

The Securities and Exchange Commission has been fighting for a year to get companies to disclose how much of their cash hoards are stashed overseas. It matters to investors, the SEC thinks, because $1 billion overseas amounts to a lot less — after taxes — if it’s brought back to the U.S. to buy back shares or pay dividends.

The pressure takes the form of moral suasion and is delivered in correspondence with the companies, much of which has now been disclosed.

An exchange with the SEC looks something like this one with Whirlpool Corp. in May. The SEC says (emphasis ours):

“Tell us your consideration of providing liquidity disclosures to discuss the potential tax impact associated with the repatriation of undistributed earnings of foreign subsidiaries. In this regard, consider disclosing the amount of cash and investments that are currently held by your foreign subsidiaries and disclose the tax impact of repatriating the undistributed earnings of foreign subsidiaries.”

The SEC doesn’t always get its way. Whirlpool disclosed that as of Dec. 31, it had $1.1 billion of cash and cash equivalents on hand, of which $941 million was held outside the United States. But the company then says it isn’t necessary to “disclose the potential tax impact related to repatriating these earnings as Whirlpool currently has no need or intention in the foreseeable future to do so.”

Whirlpool declined to comment.

A J.P. Morgan research report estimates that there is $1.7 trillion of undistributed foreign earnings held by more than 1,000 U.S. companies overseas. But only 600 disclose how much of their foreign cash is held offshore. Some like Johnson & Johnson and Illinois Tool Works have all their cash in foreign subsidiaries.

In a back-and-forth with Hewlett Packard Co. last year, in a third letter over four months the SEC said:

“In an effort to better understand and evaluate your assertions please tell us the amount of cash that is held outside of the U.S. as of each of the last four quarter-ends. Also with regards to your disclosure that a substantial amount of cash is held outside of the U.S., please revise your disclosures to qualify further what you mean by “a substantial amount. For instance, clarify whether ‘substantially all’ or ‘a significant large majority’ of your cash is held outside of the U.S.”

HP agreed to provide a table showing the portion HP’s cash held outside of the United States — but only to the SEC. In further disclosures to investors, the company would merely state that “substantially all of HP’s total cash balances are held outside of the United States.”

So how much cash does HP have outside of the U.S.? It’s hard to know. “Exhibit A” isn’t in the filing because HP requested FOIA confidential treatment.

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[...] Wall Street Journal Today: A J.P. Morgan JPM +1.58% research report estimates that there is $1.7 trillion of undistributed foreign earnings held by more than 1,000 U.S. companies overseas. But only 600 disclose how much of their foreign cash is held offshore. Some like Johnson & Johnson JNJ +0.31% and Illinois Tool Works ITW +1.26% have all their cash in foreign subsidiaries. [...]